A mixture of economic, political and geopolitical factors led to significant volatility in the U.S. financial markets during the fourth quarter of 2024. Significant days of trading occurred in both directions. After the decisive election in the United States, the S&P 500 climbed by 3.6% in a single trading session. December 18th saw a “hawkish cut” by the Federal Reserve which indicated future cuts might not be as forthcoming as hoped for; the S&P 500 declined by 3.34%. During the 252 trading days of 2024, the S&P 500 experienced 57 all-time highs, 72 days of 1% moves in either direction. This is representative of increased volatility.
The S&P 500 and Nasdaq Composite both recorded their second year of greater than 20% returns, driven by strong corporate earnings, low unemployment, and optimism related to AI-driven productivity gains on the horizon. The notable shift in investor sentiment that we discussed in the third quarter - a rotation from large-cap growth to value and smaller company names – didn't continue in the fourth quarter. However, Heron Bay’s equity strategies performed well, far exceeding inflation, as you’ll see in the pages to follow. With such significant returns over the past few years, it makes sense to evaluate your asset allocation and do some financial planning updates. If you have not had a one-on-one interaction in the last few months, please reach out to the team to schedule a meeting.

Overall, the U.S. economy demonstrated resilience in the face of uncertainty. Pundits questioned how the equity markets could disregard the ongoing wars and negative news flow at various times. But strong corporate earnings and a robust labor market provided a solid foundation for economic stability. While concerns about a potential recession persisted, the proactive measures taken by the Federal Reserve and the adaptability of businesses and consumers helped maintain economic momentum. Further, the United States stood out relative to other global economies, which can continue to power the equity markets higher. As the year concluded, we and most investors remained cautiously optimistic, closely monitoring economic indicators and policy developments to navigate the evolving financial landscape. For us, the continued growth of earnings and cash flow among the companies we own should be the dominant factor for another good year ahead. However, we expect continued volatility as valuations and sentiment in some sectors of the market are stretched. And there will certainly be reactions to policy changes to come along with the new administration as well. These reactions are impossible to predict, so we can only be reactive and approach new circumstances pragmatically. The good news about narrative driven markets (and the businesses that underlie it) is that they will regularly overshoot or undershoot their fair value. As stock-pickers that utilize quantitative tools to comb through company data, we are constantly reviewing market constituents for risk-adjusted opportunities. Market volatility and noise should present opportunities to express our latent research focusing on the highest quality assets in the market.
Happy New Year!
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Heron Bay Capital Management, LLC (“HBCM”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where HBCM and its representatives are properly licensed or exempt from licensure.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. You cannot invest directly in an Index. Return data sourced from FactSet and Orion.
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